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Business
Discover the wide range of business and financial services available in Labuan IBFC
Commodity Trading
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1. What is the purpose of the Global Incentives for Trading (GIFT) programme?
The Global Incentives for Trading (GIFT) programme, launched in collaboration with the Malaysia Petroleum Resources Corporation (MPRC), is aimed at positioning Malaysia as a regional trading and storage hub for oil and gas.
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2. What is a Labuan international commodity trading business?
A Labuan international commodity trading business is the trading of petroleum and petroleum-related products, minerals, carbon credits and any other commodities as may be approved by Labuan FSA in any currency other than the Malaysian Ringgit under the GIFT programme. Trading under the GIFT programme is defined as the buying, selling and/or brokering of the specified commodities.
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3. How to apply and what are the conditions for licence under the GIFT programme?
The Labuan international commodity trading company (LITC) must have sufficient capital/working funds that commensurate or are in accordance with its operations and activities. Upon licensing, the LITC must ensure the following:
- Indicate clearly on its letterhead, stationery and other documents including signage containing its name that it is licensed as a “Labuan International Commodity Trading Company” under the Labuan Financial Services and Securities Act 2010, together with its licence number
- The business is conducted with proper corporate governance and has a risk management framework in place; and
- Is expected to comply with other requirements of the Labuan Companies Act 1990, the Labuan Financial Services and Securities Act 2010 and other relevant laws, whichever is applicable.
- Indicate clearly on its letterhead, stationery and other documents including signage containing its name that it is licensed as a “Labuan International Commodity Trading Company” under the Labuan Financial Services and Securities Act 2010, together with its licence number
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4. What are the qualifying criteria for an LITC?
- Minimum annual turnover of USD100 million
- Minimum annual business spending of RM3 million payable to Malaysian residents; and
- To employ at least three professional traders with a minimum salary of RM15,000 per month each and being resident of Malaysia in a calendar year for a year of assessment under the Income Tax Act 1967.
- Minimum annual turnover of USD100 million
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5. What are the permitted activities under the GIFT programme?
The permitted activities include buying, selling and /or broking of the following physical and related derivative instruments:
- petroleum and petroleum-related products, including liquefied natural gas (LNG)
- agriculture products
- refined raw materials
- chemicals; and
- base minerals,
in any currency other than the Malaysian Ringgit under the GIFT programme. -
6. Can the LITC operate out of Labuan but in Malaysia?
The LITC is allowed to establish its operational office(s) and operate anywhere in Malaysia but it must maintain its registered office in Labuan, which is the office of the Labuan trust company.
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7. Can the LITC deal with residents?
The LITC is to deal with non-residents in any currency other than the Ringgit. However, an LITC that trades commodities as specified under paragraph 5(i) above and coal is permitted to deal with residents in any currency other than the Ringgit.
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8. What is the corporate tax for an LITC under the GIFT programme?
An LITC shall be subject to a corporate tax rate of 3% on chargeable profits as reflected in the audited accounts under the Labuan Business Activity Tax Act 1990 as per the relevant exemption order. An LITC set up purely as an LNG trading company would be entitled to a 100% income tax exemption on chargeable profits for the first three (3) years of its operation provided the company is licensed before 31 December 2014.
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9. Are there any forms of indirect taxes applicable on an LITC?
Labuan is a duty-free zone, hence there are no indirect taxes.
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10. What are the fees payable by LITCs in Labuan IBFC?
The fees payable are illustrated in the table below:Type of FeesAmountProcessing FeeRM1,000USD350Annual FeeRM40,000USD13,000All licensees are required to pay to Labuan FSA annual licence fees on or before 15 January of each year.
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11. Goods and Services Tax (GST) - Labuan International Commodity Trading Company
REGISTRATION1. Do Labuan traders undertaking import and export activities to/from DA, with annual taxable threshold exceeding RM500,000 required to register for GST?Registration is mandatory for businesses with turnover that exceeding RM500,000 per year. In general, the determination of threshold of the turnover is as follows:-Import activities to DAFromGoodsServicesWorld to DANot subject to GSTNot subject to GSTPCA to DAZero ratedStandard ratedDA to DANot subject to GSTNot subject to GSTExport activities from DAFromGoodsServicesDA to WorldZero ratedZero ratedDA to PCASubject to GSTStandard ratedDA to DANot subject to GSTNot subject to GSTGST TREATMENT2. Is it an exempted supply (ie. no GST charged) if we trade with other LITCs (e.g. MRLL with PETCO) in regards of the physical cargo movement?The Goods and Service Tax (Imposition of tax for supplies in respect of designated area) Order 2014 stipulated that the supply of petrol, diesel and liquefied petroleum gas within or between the DA and the importation of such goods into the DA are subject to GST at standard rate.However, if the purchase and sale does not involve any physical cargo movement of goods in/through Malaysia, it is out of scope from GST requirements.3. Is GST applied on the goods purchased from bonded area (Tanjung Pelepas, Johor)?The GST treatment for goods purchased from bonded area, which is a PCA, to:-
- DA – Goods purchased from PCA to DA are zero-rated unless stated in the "Goods and Service Tax (Imposition of tax for supplies in respect of designated area) Order 2014" which include petrol, diesel, liquefied petroleum gas, freight services and telecommunication services.
- PCA – subject to GST at standard rated.
- World – zero rated.
GST REPORTING AND SETTLEMENT4. LITC can only deal in any currency other than Ringgit. However, GST is dominated in Ringgit only. This will lead to exchange differences and cause a huge impact as the amount involved is large.The GST must be paid in Ringgit Malaysia. For purpose of conversion, the monthly average rate can be utilised.
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